Main points of investment

Excluding the influence of Sixiang, the business situation continues to improve.

In the first three quarters of 2023, the company's revenue was 403 million yuan,-72% compared with the same period last year; the net profit was-4.96 million yuan, 436% from the same period last year; and the net profit after deducting non-return was-10.5 million yuan, + 38% from the same period last year. From a quarterly point of view, Q3's revenue in a single quarter was 143 million yuan,-75% compared with the same period last year; the net profit returned to the mother was-2.72 million yuan,-779% from the same period last year; and the non-return net profit was-4.31 million yuan, + 16% from the same period last year. The change is mainly due to Dongguan Sixiang no longer merging table (continue to hold 18.06% stake in Dongguan Sixiang). Excluding the influence of Xixiang, we expect the company's revenue to pick up gradually. Net profit is affected by factors such as the reduction of government subsidies, the adjustment of corporate income tax rate in Gaolan, Guangzhou and the payment of corporate income tax in 2022.

Data center / UHV / energy storage troika drive growth

Data center liquid cooling field: the company has a deep accumulation of technology, and its key products include server liquid cooling plates, fluid connection components, various models and different heat transfer forms CDU, multi-size and different power TANK, heat exchange units, which can provide cold plate liquid cooling data center thermal management and immersion liquid cooling data center thermal management solutions. It has the ability of one-stop integrated solution from heat dissipation architecture design and equipment integration to system debugging and operation and maintenance.

The demand for AIGC-driven computing power is increasing, and chip-level liquid cooling will become the mainstream heat dissipation scheme. The company's liquid-cooled products have obvious advantages in the first place. At present, the liquid-cooled products in the data center have gradually entered the stage of batch supply.

UHV field: during the 14th five-year Plan period, the State Grid plans to build UHV projects with a total investment of 380 billion yuan, with a substantial increase compared with the 13th five-year Plan. According to the planning of the State Grid, the construction of "6 direct and 2 AC" is expected to start in 2023, and three UHVDC projects have been approved from the beginning of the year to July. With the National Energy Administration put forward the "three traffic and nine direct" UHV planning project, and the increasing demand for the delivery of the scenic base, it is expected that a new round of construction peak of UHV will be ushered in from 2023 to 2025.

The field of soft sea wind: the far-reaching sea trend of offshore wind power is expected to bring new demand for the company's products. The company is the first set of domestic suppliers of water-cooled products for offshore flexible projects. For the three Gorges such as the East China Sea wind flexible DC transmission project to provide external cooling public cooling system. With the development of offshore wind power parity and the landing of far-reaching offshore projects, the business will grow rapidly.

The field of energy storage liquid cooling: the company continues to invest in the research and development of energy storage battery thermal management technology, and there are technical reserves and solutions based on lithium battery single cabinet energy storage liquid cooling products, large energy storage power station liquid cooling systems, prefabricated tank type energy storage liquid cooling products, etc., at present, related products are gradually entering the stage of batch supply. It is expected that with the rapid development of China's energy storage temperature control industry, the company's energy storage thermal management products will continue to expand the market and fully benefit.

The wife and daughter of the major shareholder plan to subscribe in full, and have passed the examination and approval of the Shenzhen Stock Exchange. The wife and daughter of the major shareholder plan to subscribe in full (no more than 400 million yuan). Before the fixed increase, Li Qi, the major shareholder, holds 14.1% of the shares, and after the issue, calculated according to the ceiling, Li Qi and the people who act in concert hold a total of 25.8%. The funds raised will be used to replenish the flow and repay bank loans, which will effectively ease the financial pressure on the company. The fixed increase project has been approved by Shenzhen Stock Exchange at present.

Profit forecast and valuation

The company is the leading liquid cooling solution provider in China. The demand for AIGC catalytic chip liquid cooling breaks out, and the energy storage liquid cooling business is accelerated. We expect the company's 2023-2025 net profit to be 0.3,1.61 and 231 million yuan, corresponding to 165,30 and 21 times PE, respectively. Based on the optimistic judgment of the medium-term prosperity of the various areas of the company's business, we maintain the "buy" rating.

Risk hint

The UHV construction is not as expected; the tender share is not as expected; the company's gross profit margin is not as expected.